To better understand the strength of a price move, it is essential to incorporate volume analysis into your trading strategy. Volume indicators integrated into TradingView Charts are great for traders to base their decisions on market activity. Volume analysis lets you measure whether a price movement is driven by an influx of strong participation or instead a temporary one.
Volume describes the quantity of shares, contracts, or units of a security traded during a period. Volume analysis gives you a view on market sentiment and what future prices might look like. Volume often shows up on the bottom of price charts in the form of vertical bars on TradingView charts. Volume traded is presented as each bar of the time series, and bar height represents trading activity using the unit measurement.
Observing volume spikes is one of the simplest ways of incorporating volume analysis into TradingView Charts. A large volume increase implies high market interest and higher chances of a persistent trend. However, low volume during a price movement can mean a lack of conviction, such that the price move may not hold. Let’s use a hypothetical: If the price of a stock goes up, but the volume is low, it could be an indication that the push up might not have enough market participation to make it stick.
You can also combine volume with other TradingView Chart signals to add to your analysis. One common way is to use volume along with price action. For one, a price breaking through a resistance level with a high volume spike will be a signal that the breakout is real, not just a fake. Similarly, if the price falls below a support level with high volume, it could indicate a strong bearish trend.
Therefore, the Volume Moving Average (VMA) is also an equally useful tool on TradingView Charts. This indicator smooths out volume data to make it easier to spot trends, as well as when volume activity becomes unusual. You can quickly notice the current volume falling (or rising) above average volume by comparing the current volume with the average volume over a certain period of time. A volume spike over the moving average can be an indication of a big move, whereas a drop under can mean things are slowing.
New to TradingView Charts is the application of the On Balance Volume (OBV) indicator, which can offer traders who are more advanced deeper insights. Price and volume data are combined to help in the determination of trend movement. The OBV considers the direction of the price movement based on the rises and falls of the OBV, which will indicate if the volume is backing an upward moving price or the volume supports the falling price.
With TradingView Charts, using volume analysis allows you to have a better look at the market. Observing how volume works with price movements will help you make better-informed decisions and tell you if there could be entry or exit opportunities. If you have the right tools and techniques, volume analysis can become an invaluable part of your trading strategy.
